Online music to become free - but with ads?

Microsoft has licensed its audio watermarking technology to Activated Content, a deal which may lead to free music that is supported by ads:

According to the announcement of the deal, "Microsoft's audio watermarking technology consists of digital audio software tools that will allow Activated Content to insert and extract non-secure data into audio files that they can use to offer additional services to the audio file end users." DRM provides few "additional services" to end users, so it's clear that the two companies are either taking the concept of "spin" to new levels or else they're talking about something else entirely.

We believe that "something else" can be found in an Activated white paper called "The Future of Watermarking" (PDF). In it, Activated compares watermarking to digital fingerprinting (which can tell you without using metadata that a digital music file is, say, "Stairway to Heaven") and points out that watermarking can go way beyond. It can certainly be used in conjunction with DRM software to limit rights, but it can also be used to deliver targeted advertising to listeners.